The Great Recession of 2007-2009 may be distracting attention from a more fundamental troubling economic trend. The United States appears to be suffering from a long-term leak in job creation that pre-dates the recession and has the potential to persist for an unknown time. The heart of the problem is a pullback by newly created businesses, the economy's most critical source of job creation, which are generating substantially fewer jobs than one would expect based on past experience. . . .

At a time when policymakers are focused on finding solutions to sluggish employment growth, the role of young firms and establishments on broader employment growth is poorly understood and appreciated. Two implicit assumptions in the debate about jobs, which we believe are wrong, deserve mention.

First, policymakers’ focus on big changes in employment because of events such as a new manufacturing plant or the recruitment of a business to a community ignore the more important fact that our jobs outlook will be driven more by the collective decisions of the millions of young and small businesses whose changing employment patterns are not as easy to see or influence.

Second, it is just as easy to be deluded into thinking that the jobs problem will be solved by growth in the number of the self-employed. . . .

The clear challenge for the U.S. economy instead is to start more employer businesses, ensure that they are starting larger, and nurture their growth.

Those visits to new plants are the bread and butter of political theatrics. In any case, the (probably accurate) notion that "changing employment patterns are not... easy to see or influence" fails to give politicians and candidates something to promise. Don't expect any 2012 contenders to suggest that there is almost nothing we can do about the employment situation.

Thursday, July 7, 2011

To the degree that any deal wins bipartisan support on slowing the growth of Medicare, for example, it would deprive Democrats of what has been one of their most potent arguments heading into 2012: their assertion that Republicans would gut the traditional Medicare system and leave older Americans vulnerable to rapidly rising health care costs.

Purely as a practical matter, it’s far from clear that it’s even possible to stop making the 3 million payments that Treasury makes automatically every day. Doing so involves a massive computer-reprogramming effort which I’m sure could not be implemented overnight. . . .

At that point — and no earlier — there would be enormous pressure on the White House to pull out the 14th Amendment and declare the debt ceiling unconstitutional, if only for practical reasons. . . .

Now that the Republicans can see how much leverage the debt ceiling gives them, they’re going to pull this stunt every time it gets near.

A vote on a deal is a potential triple whammy for members of Congress. Raising the debt limit, in and of itself, is unpopular. So is cutting or amending popular entitlement programs. The cherry on top are potential tax increases — although since some of the revenue raisers on the table poll reasonably well, that is likely to be more of a problem for Republicans than Democrats.

Until they started to play hardball in this way, Mr Obama had been deplorably insouciant about the medium-term picture, repeatedly failing in his budgets and his state-of-the-union speeches to offer any path to a sustainable deficit. Under heavy Republican pressure, he has been forced to rethink. . . .

The vast majority of Republicans, driven on by the wilder-eyed members of their party and the cacophony of conservative media, are clinging to the position that not a single cent of deficit reduction must come from a higher tax take. This is economically illiterate and disgracefully cynical.